CPPIB to Invest INR20B in India Infrastructure Developer

June 25, 2014

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Canada Pension Plan Investment Board has agreed to purchase a minority stake in Larsen & Toubro's subsidiary, L&T Infrastructure Development Projects Limited, for INR20 billion ($332 million). Under the agreement, CPPIB will first invest INR10 billion ($166 million) for preference shares compulsorily convertible into equity shares by 2018 at a valuation to be determined by a mutually agreed process, with another INR10 billion ($166 million) to be invested 12 months following the initial investment.

L&T IDPL develops infrastructure projects in partnership between India's Central and State governments, private sector partners, financing agencies and communities. With a portfolio of assets comprising 23 projects with estimated project costs of $7.5 billion, L&T IDPL has business interests in the development of roads and bridges, ports, metro rail, power transmission lines and more.

A recent OECD report forecasted higher growth rates for India for the next few years, and the Reserve Bank of India projects growth of over 5.5% this fiscal year, after the last couple years of subpar expansion. This uptick, along with other recent changes in the country, could make investment in India more appealing to outside investors. Last year, U.S. and Canadian investors completed 54 PE deals in the country, up from 2012's 46 but down from 2011's 61, according to the PitchBook Platform.

Optimism surrounding India's future growth is probably a key factor in CPPIB's recent decision to buy a minority stake in L&T IDPL. In a press release, André Bourbonnais, senior vice president, Private Investments at CPPIB said, "This transaction represents CPPIB's first investment in India's infrastructure sector... and fits well with our strategy for India as a key long-term growth market." CPPIB, for one, appears to be betting on Indian growth for the foreseeable future. The rest of 2014 will reveal whether other PE investors will follow suit.